Credit rating agency Moody's has put Chorus on review for a possible downgrade after the network operator said a Commerce Commission proposal could cost it up to $160 million.
The watchdog is proposing to reduce what Chorus can charge retail service providers for using its electronics to provide broadband on its copper network.
Moody's says if the proposal is implemented as it currently stands it could reduce Chorus' cashflow and increase its debt.
The credit rating agency says despite the proposal still being subject to consultation, at this stage the potential for an adverse outcome is material.
The agency says as well as looking at the higher regulatory business risk to Chorus, the review will also look at the impact of a final decision by the regulator on the roll-out of ultra-fast broadband.
After the proposals were announced on Monday the Government said it would not rule out a law change to cut across the final decision, if it's seen as unfavourable.
Chorus says reducing copper-based prices will significantly reduce fibre uptake.
The Commerce Commission says it's just a proposal at this stage, and it has calculated the costs by benchmarking against other countries, the way it is required to by legislation.
Standard and Poor's has kept Chorus's rating unchanged, but the agency notes the Commerce Commission's proposal could materially affect the take-up of fibre.
The agency says given the Government's objective to encourage fibre take-up, it expects the regulator's draft decision to be subject to significant political deliberation.
Shares in Chorus have continued to drop, falling 13 cents (4.5%) to close at $2.78 on Tuesday.